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Agglomeration, trade and selection

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  • Ottaviano, Gianmarco I.P.

Abstract

This paper studies how firm heterogeneity in terms of productivity affects the balance between agglomeration and dispersion forces in the presence of pecuniary externalities through a selection model of monopolistic competition with endogenous markups. It shows that firm heterogeneity matters. However, whether it shifts the balance from agglomeration to dispersion or the other way round depends on its specific features along the two defining dimensions of diversity: ‘richness’ and ‘evenness’. Accordingly, the role of firm heterogeneity in selection models of agglomeration can not be fully understood without paying due attention to various moments of the underlying firm productivity distribution.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 42 (2012)
Issue (Month): 6 ()
Pages: 987-997

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Handle: RePEc:eee:regeco:v:42:y:2012:i:6:p:987-997

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Web page: http://www.elsevier.com/locate/regec

Related research

Keywords: Agglomeration; Trade; Heterogeneity; Selection; Economic geography;

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References

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  1. Richard Baldwin & Toshihiro Okubo, 2005. "Heterogeneous Firms, Agglomeration and Economic Geography: Spatial Selection and Sorting," NBER Working Papers 11650, National Bureau of Economic Research, Inc.
  2. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," NBER Working Papers 11393, National Bureau of Economic Research, Inc.
  3. Pierre-Philippe COMBES & Gilles DURANTON & Laurent GOBILLON & Diego PUGA & Sébastien ROUX, 2009. "The Productivity Advantages of Large Cities : Distinguishing Agglomeration from Firm Selection," Working Papers 2009-08, Centre de Recherche en Economie et Statistique.
  4. Toshihiro Okubo & Pierre M. Picard & Jacques-François Thisse, 2008. "The spatial selection of heterogeneous firms," CREA Discussion Paper Series 08-16, Center for Research in Economic Analysis, University of Luxembourg.
  5. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2011. "Spatial Frictions," CEP Discussion Papers dp1108, Centre for Economic Performance, LSE.
  6. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
  7. Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010. "New Trade Models, Same Old Gains?," 2010 Meeting Papers 433, Society for Economic Dynamics.
  8. Kristian Behrens & Frédéric Robert-Nicoud, 2008. "Survival of the Fittest in Cities: Agglomeration, Selection, and Polarisation," CEP Discussion Papers dp0894, Centre for Economic Performance, LSE.
  9. Volker Nocke, 2003. "A Gap for Me: Entrepreneurs and Entry," PIER Working Paper Archive 05-026, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 29 Sep 2005.
  10. PICARD, Pierre M. & OKUBO, Toshihiro, . "Firms' locations under demand heterogeneity," CORE Discussion Papers RP -2459, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  11. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  12. Carole Maignan & Gianmarco Ottaviano & Dino Pinelli & Francesco Rullani, 2003. "Bio-Ecological Diversity vs. Socio-Economic Diversity: A Comparison of Existing Measures," Working Papers 2003.13, Fondazione Eni Enrico Mattei.
  13. Behrens, Kristian & Duranton, Gilles & Robert-Nicoud, Frédéric, 2010. "Productive cities: Sorting, selection and agglomeration," CEPR Discussion Papers 7922, C.E.P.R. Discussion Papers.
  14. Gianmarco I. P. Ottaviano, 2011. "Firm Heterogeneity, Endogenous Entry, and the Business Cycle," NBER Chapters, in: NBER International Seminar on Macroeconomics 2011, pages 57-86 National Bureau of Economic Research, Inc.
  15. repec:cup:cbooks:9780521805247 is not listed on IDEAS
  16. repec:cup:cbooks:9780521801386 is not listed on IDEAS
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Citations

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Cited by:
  1. Holger Breinlich & Gianmarco I. P. Ottaviano & Jonathan R. W. Temple, 2013. "Regional growth and regional decline," LSE Research Online Documents on Economics 51575, London School of Economics and Political Science, LSE Library.
  2. Gábor Békés & Péter Harasztosi, 2010. "Agglomeration Premium and Trading Activity of Firms," CeFiG Working Papers 11, Center for Firms in the Global Economy, revised 28 Jan 2010.

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